What is Capital Gains Tax (CGT)?
A tax on the profit you make when you sell or dispose of an asset that has increased in value.
Key Facts
- ✓ Annual exempt amount: £3,000 (2025/26)
- ✓ Basic rate: 10% (most assets), 18% (residential property)
- ✓ Higher/additional rate: 20% (most assets), 24% (residential property)
- ✓ Main home is exempt (Principal Private Residence relief)
- ✓ ISA investments are exempt
- ✓ Property CGT must be reported within 60 days
Current Rates (2025/26)
- ▸ Annual exempt amount: £3,000
- ▸ Basic rate: 10% / 18% (property)
- ▸ Higher rate: 20% / 24% (property)
Explanation
Capital Gains Tax (CGT) is charged on the profit (gain) you make when you sell or dispose of an asset that has increased in value. Common assets subject to CGT include shares, cryptocurrency, second properties, and valuable personal possessions worth over £6,000. You do not pay CGT on your main home (thanks to Principal Private Residence relief), ISA investments, or assets given to your spouse or civil partner. For 2025/26, the annual exempt amount is £3,000 — the first £3,000 of gains each year are tax-free. Above that, basic rate taxpayers pay 10% on most assets (18% on residential property), while higher and additional rate taxpayers pay 20% (24% on residential property). CGT on property sales must be reported and paid within 60 days of completion.
Try the calculator: Use our free calculator to see how capital gains tax (cgt) affects your finances.
Capital Gains Tax Calculator →Other Glossary Terms
The system HMRC uses to collect income tax and National Insurance directly from employee wages.
National InsuranceA UK tax on earnings and self-employed profits that funds the state pension, NHS, and benefits.
Personal AllowanceThe amount of income you can earn each year before paying income tax — currently £12,570.
Basic Rate (20%)The 20% income tax rate applied to taxable income between £12,571 and £50,270.
Higher Rate (40%)The 40% income tax rate applied to taxable income between £50,271 and £125,140.
Additional Rate (45%)The 45% income tax rate applied to taxable income above £125,140.
Frequently Asked Questions
What does capital gains tax (cgt) mean?
A tax on the profit you make when you sell or dispose of an asset that has increased in value.
Why does capital gains tax (cgt) matter?
Understanding capital gains tax (cgt) helps you make informed financial decisions and ensure you pay the correct amount of tax. Getting it wrong could mean overpaying or underpaying HMRC, which may result in penalties or missed savings. Use our calculators to see how capital gains tax (cgt) applies to your personal situation.
Where can I find more information about capital gains tax (cgt)?
HMRC publishes official guidance on GOV.UK for all UK tax topics. For a quick overview, our glossary entries are written in plain English and updated each tax year. You can also use our free online calculators to model different scenarios and understand how changes to your income, deductions, or allowances affect your overall tax position.